EU moves to curb bankers' bonuses

Updated
March 01, 2013 08:21:00

Bankers bonuses within the European Union look set to be capped at one year's salary under a provisional agreement hammered out at late night talks in Brussels. There's been an angry reaction from London to the move, with the government and the Mayor arguing that it could stifle competition.

TIM PALMER: The British government has leapt to the defence of bankers, and their right to earn more than an entire year's salary in bonuses.

The European Union is moving to restrict bankers' bonuses to just that amount, following a series of banking scandals and the taxpayer-funded bailout of banks during the global financial crisis.

But British prime minister David Cameron says the finance sector needs flexibility to remain competitive.

Europe correspondent Barbara Miller reports.

BARBARA MILLER: It's another case of Britain versus the European Union.

A move to cap bankers' bonuses at roughly one year's salary didn't amuse the British prime minister David Cameron.

DAVID CAMERON: We have major international banks that are based in the UK but have branches and activities all over the world and we need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK.

BARBARA MILLER: The bonus cap was provisionally approved at a tense late-night meeting in Brussels.

The British chancellor of the exchequer George Osborne reportedly snapped at one point, saying backing such a deal would make him look like an idiot.

The mayor of London Boris Johnson has weighed in typically provocative style, saying people will wonder why the UK stays in the EU if it persists in what he calls 'transparently self-defeating policies'.

And at Canary Wharf where many of the big banks have their offices, it was no real surprise that there wasn't much support for the cap plan.

Some bankers argued that such a move would see the best people move out of the UK, just when they are needed most.

And then there was this colourful argument:

VOX POP: It's anti-capitalist (laughs). Yeah, no I don't agree, not at all, no because if you have a gross amount and he does really well, you know, in the market, he does really well so there's loads of fruits, he can make loads of profit and get to keep it. No one would say oh no, he's making too much money from those fruits, cap his income.

BARBARA MILLER: The Royal Bank of Scotland (RBS) is still paying hundreds of millions of dollars in bonuses each year, though the bank says it has curbed that spending.

The RBS has just announced a $7.5 billion loss for last year.

The bank is still digging its way out of its scandal-ridden past, including the mis-selling of payment protection insurance and the Libor fixing scandal.

But the CEO Stephen Hester says things are on the up.

STEPHEN HESTER: Every year that passes we are chopping away at the bad inheritance we had.

BARBARA MILLER: Stephen Hester stresses that the bank's operating profit is up to more than $5 billion and is even suggesting the RBS could soon be in good enough shape for the UK government to start selling off the 80 per cent stake it took over in 2008.

STEPHEN HESTER: I think that RBS will be ready to be privatised within the next couple of years. When the government decides to do it is a matter for them.

BARBARA MILLER: Some analysts suspect the RBS is talking up its prospects a little.

But however painful a $7.5 billion loss is, it pales in comparison to the Spanish Bankia, a merger of seven troubled banks.